Tumor necrosis factor-alpha (TNF alpha) is one of several autocrine/paracrine factors known to exert potent inhibitory effects on bone. We have shown that TNF alpha inhibition of 1,25-dihydroxyvitamin D3 [1,25-(OH)2D3]-stimulated synthesis of the bone-specific protein osteocalcin (OC) occurs by decreasing steady state levels of OC mRNA, suggesting a pretranslational mechanism. In many genes, TNF alpha action is mediated by the transcription factor NF kappa B. Analysis of OC 5'-flanking DNA revealed a sequence structurally homologous to the previously described NF kappa B-binding site and, thus, a potential TNF alpha response element. Deletion analysis was performed to identify the sequences mediating the response to TNF alpha in osteoblastic ROS 17/2.8 cells by transient transfection with reporter constructs containing rat OC 5'-flanking DNA [chloramphenicol acetyltransferase (CAT)] that retained or deleted homologous NF kappa B sites or a previously defined 1,25-(OH)2D3 response element (VDRE). Transfection with all reporter constructs resulted in low basal CAT activity, measured 72 h after transfection. 1,25-(OH)2D3 stimulated CAT activity 2.8- to 4.5-fold in cells transfected with constructs that included the VDRE. TNF alpha inhibited 1,25-(OH)2D3-stimulated, but not basal, CAT activity. Deletion analysis localized the effect of TNF alpha to a sequence between -522 and -306 relative to the OC transcription start site, an area that included the VDRE but deleted a homologous NF kappa B element. Transfection of cells with a heterologous reporter containing one copy of the OC VDRE inserted in correct orientation or two copies in inverse orientation was sufficient to confer a response to TNF alpha. Gel mobility shift analysis of DNA-nuclear protein interaction revealed that 1,25-(OH)2D3 stimulated an increase in binding of nuclear proteins to an OC 32P-VDRE probe. Preincubation of nuclear extract with specific monoclonal antibodies confirmed that the proteins binding the VDRE included the vitamin D receptor and retinoid-X receptor. TNF alpha treatment of cells inhibited the 1,25-(OH)2D3-stimulated increase in nuclear protein binding to the VDRE. These results suggest 1) the VDRE is sufficient to confer a response to the inhibitory effect of TNF alpha on 1,25-(OH)2D3-stimulated rat OC gene transcription; 2) the action of TNF alpha does not require homologous NF kappa B response elements; and 3) the mechanism of TNF alpha inhibition of 1,25-(OH)2D3-stimulated OC gene expression includes modulation of binding of the vitamin D receptor/retinoid-X receptor heterodimer to the VDRE.